Investors swap shares for cash

PA

Renewed jitters in the stockmarket prompted investment into cash to more than double in the third quarter of 2011, according to the recent investment trends report from Skandia.

Yet as worried investors move from stocks to safer holdings, experts say it is a good opportunity for savvy investors to pick up a bargain.

Sales into cash funds increased by 121% on the Skandia Investment fund platform, making the sector the third highest selling during the third quarter.

Graham Bentley, Skandia's investment expert, said: "Investment into cash and money market funds had been declining steadily since the last period of extreme market volatility in 2008 but has now shot up to its highest level since the first quarter of 2009.

"This is understandable, nevertheless cash still only accounts for approximately 13% of sales, indicating that the majority of investors are using the platform to invest in a well-balanced portfolio for the long term."

Sales into UK Fixed Interest funds increased slightly keeping it the highest selling sector, while UK Equity funds sales dropped by 10% compared to the previous quarter. All equity sectors bar Japan saw decreases in sales levels during the quarter.

Long term benefits
Mr Bentley said that investors would be picking up bargain equities while the share prices were depressed, and they would benefit over the long term.

"In particular, investors should consider dividend income, which on many equities is very attractive at current valuations, especially as any increase in interest rates seems some way off – on the contrary the next move in interest rates is more likely to be down to 0.25pc," he said.

According to the Daily Telegraph, the stock market experienced record outflows during the summer -levels not seen since before the recession hit. The amount of money put in investment funds by savers fell by up to 90% in the two months to the end of July, as investor confidence hit lows not seen since the depths of the financial crisis in 2008.

Instead, savers put their money in perceived "safe havens", with sales of gold funds rising by nearly 60%. Despite inflation decreasing the value of the pound, people increasingly choose to invest in cash as it feels like the safest option.
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